Up until a recent territorial spat between Japan and China, most people probably knew little, if anything, about the 17 elements known collectively as rare earth metals. But news that China had halted exports of these metals to Japan at the height of a row over the detention of a Chinese fishing captain—and Japan’s subsequent capitulation over the issue—have underscored just how economically vital they are.
China has officially denied suspending exports to Japan, blaming instead stricter controls and overzealous Chinese suppliers. However, export quotas this year were 24,280 tons, down from 31,310 tons in 2009. And some reports have said there are more cuts to come, with officials suggesting that the need to check environmental degradation and a possible price collapse mean an additional 30 percent cut is necessary next year.
So why all the fuss? The problem is that China has gradually acquired more than a 90 percent share of the exports of these metals, which have proved to be a critical ingredient for green energy and high-tech products ranging from wind turbines and hybrid vehicles to mobile phones and guided missiles. Their importance stems in large part from the fact that in many industries, there’s currently no viable substitute.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
Ironically, many of the rare earth metals—divided into rare earth elements (LREE) such as cerium and neodymium, and heavy rare earth elements (HREE) such as terbium, dysprosium and yttrium—aren’t actually all that rare. There are also significant rare earth deposits in Australia, India, Mongolia, Namibia, Thailand and the United States. The problem is that there’s little profit in rare earth mining unless it’s combined with downstream processes such as alloy processing.
And this is where China has stepped in. Lax environmental controls, unorganized labour, subsidies and a lack of oversight have allowed China to secure about 95 percent of global exports, despite the country holding only about 37 percent of the world’s deposits.
In many respects this shouldn’t have come as such a surprise. After all, Deng Xiaoping set the agenda almost 20 years ago when he stated that rare earths will be for China what oil was for Saudi Arabia. Soon after these remarks, China began to flood North American markets with cheap rare earth oxides both light and heavy. By 2002, Mountain Pass in the United States—which only a decade prior had stood as the world’s largest producer of rare earths—was shut down.
Today, a single mine at Bayan Obo in Inner Mongolia produces about 50 percent of the world’s rare earths, mostly LREE. The rare earths produced here are a by-product and are therefore particularly cost effective by industry standards. Most of the world’s HREE, meanwhile, come from lateritic ion adsorption clays located in Southern China.These clay-based deposits don’t require the cracking of the complex mineralogy that characterizes bedrock deposits found in other parts of the world.